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Fair Values of Assets and Liabilities

6 Months Ended

Jun. 30, 2023

GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; that is, an exit price. The exit price assumes the asset or liability is not exchanged subject to a forced liquidation or distressed sale.

Valuation Hierarchy

The Company categorizes its fair value measurements according to a three-level hierarchy. The hierarchy prioritizes the inputs used by the Company’s valuation techniques. A level is assigned to each fair value measurement based on the lowest level input that is significant to the fair value measurement in its entirety.

The three levels of the fair value hierarchy are defined as follows:

Level 1 Unadjusted quoted prices for identical assets or liabilities in active markets that are accessible at the measurement date.

Level 2 Prices or valuations based on observable inputs other than quoted prices in active markets for identical assets and liabilities.

Level 3 Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

The following tables present the balances of assets and liabilities of Ameriprise Financial measured at fair value on a recurring basis (See Note 5 for the balances of assets and liabilities for consolidated investment entities):


	June 30, 2023
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Cash equivalents	$	929	$	4,054	$	—	$	4,983
Available-for-Sale securities:
Corporate debt securities	—		10,513		446		10,959
Residential mortgage backed securities	—		19,029		—		19,029
Commercial mortgage backed securities	—		6,275		—		6,275
Asset backed securities	—		8,082		3		8,085
State and municipal obligations	—		797		—		797
U.S. government and agency obligations	1,967		390		—		2,357
Foreign government bonds and obligations	—		26		—		26
Other securities	—		59		—		59
Total Available-for-Sale securities	1,967		45,171		449		47,587

Investments at net asset value (“NAV”)							10		(1)
Trading and other securities	241		30		—		271
Separate account assets at NAV							76,874		(1)
Investments and cash equivalents segregated for regulatory purposes	662		—		—		662
Market risk benefits	—		—		1,346		1,346		(2)
Receivables:
Fixed deferred indexed annuity ceded embedded derivatives	—		—		49		49
Other assets:
Interest rate derivative contracts	3		260		—		263
Equity derivative contracts	137		4,051		—		4,188
Credit derivative contracts	—		23		—		23
Foreign exchange derivative contracts	—		19		—		19
Total other assets	140		4,353		—		4,493
Total assets at fair value	$	3,939	$	53,608	$	1,844	$	136,275

Liabilities
Policyholder account balances, future policy benefits and claims:
Fixed deferred indexed annuity embedded derivatives	$	—	$	4	$	46	$	50
IUL embedded derivatives	—		—		809		809
Structured variable annuity embedded derivatives	—		—		557		557
Total policyholder account balances, future policy benefits and claims	—		4		1,412		1,416		(3)
Market risk benefits	—		—		1,706		1,706		(2)
Customer deposits	—		9		—		9
Other liabilities:
Interest rate derivative contracts	4		371		—		375
Equity derivative contracts	139		2,955		—		3,094
Credit derivative contracts	—		1		—		1
Foreign exchange derivative contracts	6		6		—		12
Other	236		4		78		318
Total other liabilities	385		3,337		78		3,800
Total liabilities at fair value	$	385	$	3,350	$	3,196	$	6,931


	December 31, 2022
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Cash equivalents	$	1,268	$	3,835	$	—	$	5,103
Available-for-Sale securities:
Corporate debt securities	—		9,293		405		9,698
Residential mortgage backed securities	—		15,703		—		15,703
Commercial mortgage backed securities	—		6,212		—		6,212
Asset backed securities	—		6,258		6		6,264
State and municipal obligations	—		797		—		797
U.S. government and agency obligations	2,079		—		—		2,079
Foreign government bonds and obligations	—		41		—		41
Other securities	—		17		—		17
Total Available-for-Sale securities	2,079		38,321		411		40,811

Investments at NAV							9		(1)
Trading and other securities	211		16		—		227
Separate account assets at NAV							73,962		(1)
Investments and cash equivalents segregated for regulatory purposes	646		—		—		646
Market risk benefits	—		—		1,015		1,015		(2)
Receivables:
Fixed deferred indexed annuity ceded embedded derivatives	—		—		48		48
Other assets:
Interest rate derivative contracts	7		260		—		267
Equity derivative contracts	129		2,575		—		2,704
Credit derivative contracts	—		13		—		13
Foreign exchange derivative contracts	—		36		—		36
Total other assets	136		2,884		—		3,020
Total assets at fair value	$	4,340	$	45,056	$	1,474	$	124,841

Liabilities
Policyholder account balances, future policy benefits and claims:
Fixed deferred indexed annuity embedded derivatives	$	—	$	3	$	44	$	47
IUL embedded derivatives	—		—		739		739
Structured variable annuity embedded derivatives	—		—		(137)		(137)		(4)
Total policyholder account balances, future policy benefits and claims	—		3		646		649		(5)
Market risk benefits	—		—		2,118		2,118		(2)
Customer deposits	—		4		—		4
Other liabilities:
Interest rate derivative contracts	4		351		—		355
Equity derivative contracts	139		2,238		—		2,377
Credit derivative contracts	—		2		—		2
Foreign exchange derivative contracts	6		8		—		14
Other	205		5		62		272
Total other liabilities	354		2,604		62		3,020
Total liabilities at fair value	$	354	$	2,611	$	2,826	$	5,791

(1) Amounts are comprised of certain financial instruments that are measured at fair value using the NAV per share (or its equivalent) as a practical expedient and have not been classified in the fair value hierarchy.

(2) See Note 11 for additional information related to market risk benefits, including the balances of and changes in market risk benefits as well as the significant inputs and assumptions used in the fair value measurements of market risk benefits.

(3) The Company’s adjustment for nonperformance risk resulted in a $205 million cumulative decrease to the embedded derivatives as of June 30, 2023.

(4) The fair value of the structured variable annuity embedded derivatives was a net asset as of December 31, 2022 and the amount is presented as a contra liability.

(5) The Company’s adjustment for nonperformance risk resulted in a $139 million cumulative decrease to the embedded derivatives as of December 31, 2022.

The following tables provide a summary of changes in Level 3 assets and liabilities of Ameriprise Financial measured at fair value on a recurring basis:



	Available-for-Sale Securities				Receivables
	Corporate Debt Securities		Asset Backed Securities			Total			Fixed Deferred Indexed Annuity Ceded Embedded Derivatives
	(in millions)
Balance at April 1, 2023	$	440	$	5		$	445			$	48
Total gains (losses) included in:
Net income	—		—			—		(1)		2
Other comprehensive income (loss)	(7)		—			(7)				—
Purchases	23		—			23				—


Settlements	(10)		(2)			(12)				(1)


Balance at June 30, 2023	$	446	$	3		$	449			$	49


Changes in unrealized gains (losses) in other comprehensive income (loss) relating to assets held at June 30, 2023	$	(7)	$	—		$	(7)			$	—



	Policyholder Account Balances, Future Policy Benefits and Claims									Other Liabilities
	Fixed Deferred Indexed Annuity Embedded Derivatives			IUL Embedded Derivatives			Structured Variable Annuity Embedded Derivatives							Total
	(in millions)
Balance at April 1, 2023	$	44		$	771		$	142		$	957	$	70
Total (gains) losses included in:
Net income	2		(2)	54		(2)	426		(3)	482		1		(4)

Issues	—			16			19			35		19
Settlements	—			(32)			(30)			(62)		(12)
Balance at June 30, 2023	$	46		$	809		$	557		$	1,412	$	78

Changes in unrealized (gains) losses in net income relating to liabilities held at June 30, 2023	$	—		$	54	(2)	$	426	(3)	$	480	$	—



	Available-for-Sale Securities										Receivables
	Corporate Debt Securities		Residential Mortgage Backed Securities		Commercial Mortgage Backed Securities		Asset Backed Securities		Total			Fixed Deferred Indexed Annuity Ceded Embedded Derivatives
	(in millions)
Balance at April 1, 2022	$	497	$	—	$	112	$	7	$	616			$	55
Total gains (losses) included in:
Net income	(1)		—		—		—		(1)		(1)		(5)
Other comprehensive income (loss)	(11)		—		—		—		(11)				—
Purchases	—		139		—		14		153				—


Settlements	(27)		—		—		—		(27)				(1)

Transfers out of Level 3	—		—		(112)		—		(112)				—
Balance at June 30, 2022	$	458	$	139	$	—	$	21	$	618			$	49

Changes in unrealized gains (losses) in net income relating to assets held at June 30, 2022	$	(1)	$	—	$	—	$	—	$	(1)	(1)		$	—
Changes in unrealized gains (losses) in other comprehensive income (loss) relating to assets held at June 30, 2022	$	(11)	$	—	$	—	$	—	$	(11)			$	—



	Policyholder Account Balances, Future Policy Benefits and Claims									Other Liabilities
	Fixed Deferred Indexed Annuity Embedded Derivatives			IUL Embedded Derivatives			Structured Variable Annuity Embedded Derivatives							Total
	(in millions)
Balance at April 1, 2022	$	52		$	848		$	280		$	1,180	$	62
Total (gains) losses included in:
Net income	(6)		(2)	(108)		(2)	(642)		(3)	(756)		—		(4)
Other comprehensive income (loss)	—			—			—			—		(2)
Issues	—			8			14			22		6
Settlements	(1)			(29)			(14)			(44)		(5)
Balance at June 30, 2022	$	45		$	719		$	(362)	(5)	$	402	$	61

Changes in unrealized (gains) losses in net income relating to liabilities held at June 30, 2022	$	—		$	(108)	(2)	$	(642)	(3)	$	(750)	$	—


	Available-for-Sale Securities		Receivables
	Corporate Debt Securities		Asset Backed Securities		Total			Fixed Deferred Indexed Annuity Ceded Embedded Derivatives
	(in millions)
Balance at January 1, 2023	$	405	$	6	$	411		$	48
Total gains (losses) included in:
Net income	—		—		—		(1)	2
Other comprehensive income (loss)	1		—		1			—
Purchases	78		—		78			—


Settlements	(38)		(3)		(41)			(1)


Balance at June 30, 2023	$	446	$	3	$	449		$	49


Changes in unrealized gains (losses) in other comprehensive income (loss) relating to assets held at June 30, 2023	$	1	$	—	$	1		$	—


	Policyholder Account Balances, Future Policy Benefits and Claims									Other Liabilities
	Fixed Deferred Indexed Annuity Embedded Derivatives			IUL Embedded Derivatives			Structured Variable Annuity Embedded Derivatives							Total
	(in millions)
Balance at January 1, 2023	$	44		$	739		$	(137)	(5)	$	646	$	62
Total (gains) losses included in:
Net income	3		(2)	92		(2)	689		(3)	784		1		(4)
Other comprehensive income (loss)	—			—			—			—		1
Issues	—			40			31			71		33
Settlements	(1)			(62)			(26)			(89)		(19)
Balance at June 30, 2023	$	46		$	809		$	557		$	1,412	$	78

Changes in unrealized (gains) losses in net income relating to liabilities held at June 30, 2023	$	—		$	92	(2)	$	689	(3)	$	781	$	—


	Available-for-Sale Securities								Receivables
	Corporate Debt Securities		Residential Mortgage Backed Securities		Commercial Mortgage Backed Securities		Asset Backed Securities		Total			Fixed Deferred Indexed Annuity Ceded Embedded Derivatives
	(in millions)
Balance at January 1, 2022	$	502	$	—	$	35	$	7	$	544		$	59
Total gains (losses) included in:
Net income	(1)		—		—		—		(1)		(1)	(8)
Other comprehensive income (loss)	(33)		—		—		—		(33)			—
Purchases	23		139		112		14		288			—


Settlements	(33)		—		—		—		(33)			(2)

Transfers out of Level 3	—		—		(147)		—		(147)			—
Balance at June 30, 2022	$	458	$	139	$	—	$	21	$	618		$	49

Changes in unrealized gains (losses) in net income relating to assets held at June 30, 2022	$	(1)	$	—	$	—	$	—	$	(1)	(1)	$	—
Changes in unrealized gains (losses) in other comprehensive income (loss) relating to assets held at June 30, 2022	$	(32)	$	—	$	—	$	—	$	(32)		$	—


	Policyholder Account Balances, Future Policy Benefits and Claims									Other Liabilities
	Fixed Deferred Indexed Annuity Embedded Derivatives			IUL Embedded Derivatives			Structured Variable Annuity Embedded Derivatives							Total
	(in millions)
Balance at January 1, 2022	$	56		$	905		$	406		$	1,367	$	61
Total (gains) losses included in:
Net income	(9)		(2)	(140)		(2)	(766)		(3)	(915)		—		(4)
Other comprehensive income (loss)	—			—			—			—		(3)
Issues	—			8			18			26		14
Settlements	(2)			(54)			(20)			(76)		(11)
Balance at June 30, 2022	$	45		$	719		$	(362)	(5)	$	402	$	61

Changes in unrealized (gains) losses in net income relating to liabilities held at June 30, 2022	$	—		$	(140)	(2)	$	(766)	(3)	$	(906)	$	—

(1) Included in Net investment income.

(2) Included in Interest credited to fixed accounts.

(3) Included in Benefits, claims, losses and settlement expenses.

(4) Included in General and administrative expense.

(5) The fair value of the structured variable annuity embedded derivatives was a net asset as of January 1, 2023 and June 30, 2022 and the amounts are presented as contra liabilities.

The increase (decrease) to pretax income of the Company’s adjustment for nonperformance risk on the fair value of its embedded derivatives was $4 million and $87 million, net of the reinsurance accrual, for the three months ended June 30, 2023 and 2022, respectively.

The increase (decrease) to pretax income of the Company’s adjustment for nonperformance risk on the fair value of its embedded derivatives was $61 million and $120 million, net of the reinsurance accrual, for the six months ended June 30, 2023 and 2022, respectively.

Securities transferred from Level 3 primarily represent securities with fair values that are now obtained from a third-party pricing service with observable inputs or fair values that were included in an observable transaction with a market participant. Securities transferred to Level 3 represent securities with fair values that are now based on a single non-binding broker quote.

The following tables provide a summary of the significant unobservable inputs used in the fair value measurements developed by the Company or reasonably available to the Company of Level 3 assets and liabilities:


	June 30, 2023
	Fair Value		Valuation Technique	Unobservable Input	Range			Weighted Average
	(in millions)
Corporate debt securities (private placements)	$	446	Discounted cash flow	Yield/spread to U.S. Treasuries (1)	1.0%	–	2.8%	1.3%
Asset backed securities	$	1	Discounted cash flow	Annual short-term default rate (2)	3.0%			3.0%
				Annual long-term default rate (2)	3.5%			3.5%
				Discount rate	30.0%			30.0%
				Constant prepayment rate	10.0%			10.0%
				Loss recovery	63.6%			63.6%
Fixed deferred indexed annuity ceded embedded derivatives	$	49	Discounted cash flow	Surrender rate (3)	0.0%	–	66.8%	1.4%
Fixed deferred indexed annuity embedded derivatives	$	46	Discounted cash flow	Surrender rate (3)	0.0%	–	66.8%	1.4%
				Nonperformance risk (4)	100 bps			100 bps
IUL embedded derivatives	$	809	Discounted cash flow	Nonperformance risk (4)	100 bps			100 bps




Structured variable annuity embedded derivatives	$	557	Discounted cash flow	Surrender rate (3)	2.4%	–	50.2%	2.9%
				Nonperformance risk (4)	100 bps			100 bps
Contingent consideration liabilities	$	78	Discounted cash flow	Discount rate (5)	0.0%	–	10.5%	2.7%


	December 31, 2022
	Fair Value			Valuation Technique	Unobservable Input	Range			Weighted Average
	(in millions)
Corporate debt securities (private placements)	$	404		Discounted cash flow	Yield/spread to U.S. Treasuries (1)	1.1%	–	2.3%	1.4%
Asset backed securities	$	1		Discounted cash flow	Annual short-term default rate (2)	0.8%			0.8%
					Annual long-term default rate (2)	3.5%			3.5%
					Discount rate	27.0%			27.0%
					Constant prepayment rate	10.0%			10.0%
					Loss recovery	63.6%			63.6%
Fixed deferred indexed annuity ceded embedded derivatives	$	48		Discounted cash flow	Surrender rate (3)	0.0%	–	66.8%	1.4%
Fixed deferred indexed annuity embedded derivatives	$	44		Discounted cash flow	Surrender rate (3)	0.0%	–	66.8%	1.4%
					Nonperformance risk (4)	95 bps			95 bps
IUL embedded derivatives	$	739		Discounted cash flow	Nonperformance risk (4)	95 bps			95 bps




Structured variable annuity embedded derivatives	$	(137)	(6)	Discounted cash flow	Surrender rate (3)	0.8%	–	40.0%	0.9%
					Nonperformance risk (4)	95 bps			95 bps
Contingent consideration liabilities	$	62		Discounted cash flow	Discount rate (5)	0.0%	–	10.5%	3.3%

(1) The weighted average for the yield/spread to U.S. Treasuries for corporate debt securities (private placements) is weighted based on the security’s market value as a percentage of the aggregate market value of the securities.

(2) The weighted average annual default rates of asset backed securities is weighted based on the security’s market value as a percentage of the aggregate market value of the securities.

(3) The weighted average surrender rate represents the average assumption weighted based on the account value of each contract.

(4) The nonperformance risk is the spread added to the U.S. Treasury curve.

(5) The weighted average discount rate represents the average discount rate across all contingent consideration liabilities, weighted based on the size of the contingent consideration liability.

(6) The fair value of the structured variable annuity embedded derivatives was a net asset as of December 31, 2022 and the amount is presented as a contra liability.

Level 3 measurements not included in the tables above are obtained from non-binding broker quotes where unobservable inputs

utilized in the fair value calculation are not reasonably available to the Company.

Uncertainty of Fair Value Measurements

Significant increases (decreases) in the yield/spread to U.S. Treasuries used in the fair value measurement of Level 3 corporate debt securities in isolation would have resulted in a significantly lower (higher) fair value measurement.

Significant increases (decreases) in the annual default rate and discount rate used in the fair value measurement of Level 3 asset backed securities in isolation, generally, would have resulted in a significantly lower (higher) fair value measurement and significant increases (decreases) in loss recovery in isolation would have resulted in a significantly lower (higher) fair value measurement.

Significant increases (decreases) in the constant prepayment rate in isolation would have resulted in a significantly lower (higher) fair value measurement.

Significant increases (decreases) in the surrender rate used in the fair value measurement of the fixed deferred indexed annuity ceded embedded derivatives in isolation would have resulted in a significantly lower (higher) fair value measurement.

Significant increases (decreases) in nonperformance risk used in the fair value measurement of the IUL embedded derivatives in isolation would have resulted in a significantly lower (higher) fair value measurement.

Significant increases (decreases) in nonperformance risk and surrender rate used in the fair value measurements of the fixed deferred indexed annuity embedded derivatives and structured variable annuity embedded derivatives in isolation would have resulted in a significantly lower (higher) liability value.

Significant increases (decreases) in the discount rate used in the fair value measurement of the contingent consideration liability in isolation would have resulted in a significantly lower (higher) fair value measurement.

Determination of Fair Value

The Company uses valuation techniques consistent with the market and income approaches to measure the fair value of its assets and liabilities. The Company’s market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The Company’s income approach uses valuation techniques to convert future projected cash flows to a single discounted present value amount. When applying either approach, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs.

The following is a description of the valuation techniques used to measure fair value and the general classification of these instruments pursuant to the fair value hierarchy.

Assets

Cash Equivalents

Cash equivalents include time deposits and other highly liquid investments with original or remaining maturities at the time of purchase of 90 days or less. Actively traded money market funds are measured at their NAV and classified as Level 1. U.S. Treasuries are also classified as Level 1. The Company’s remaining cash equivalents are classified as Level 2 and measured at amortized cost, which is a reasonable estimate of fair value because of the short time between the purchase of the instrument and its expected realization.

Investments (Available-for-Sale Securities, Equity Securities and Trading Securities)

When available, the fair value of securities is based on quoted prices in active markets. If quoted prices are not available, fair values are obtained from third-party pricing services, non-binding broker quotes, or other model-based valuation techniques.

Level 1 securities primarily include trading securities and U.S. Treasuries.

Level 2 securities primarily include corporate bonds, residential mortgage backed securities, commercial mortgage backed securities, asset backed securities, state and municipal obligations, foreign government securities and other securities. The fair value of these Level 2 securities is based on a market approach with prices obtained from third-party pricing services. Observable inputs used to value these securities can include, but are not limited to, reported trades, benchmark yields, issuer spreads and non-binding broker quotes. The fair value of securities included in an observable transaction with a market participant are also considered Level 2 when the market is not active.

Level 3 securities primarily include certain corporate bonds, non-agency residential mortgage backed securities, commercial mortgage backed securities and asset backed securities with fair value typically based on a single non-binding broker quote. The underlying inputs used for some of the non-binding broker quotes are not readily available to the Company. The Company’s privately placed corporate bonds are typically based on a single non-binding broker quote. The fair value of certain asset backed securities is determined using a discounted cash flow model. Inputs used to determine the expected cash flows include assumptions about discount rates and default, prepayment and recovery rates of the underlying assets. Given the significance of the unobservable inputs to this fair value measurement, the fair value of the investment in certain asset backed securities is classified as Level 3.

Management is responsible for the fair values recorded on the financial statements. Prices received from third-party pricing services are subjected to exception reporting that identifies investments with significant daily price movements as well as no movements. The Company reviews the exception reporting and resolves the exceptions through reaffirmation of the price or recording an appropriate fair value estimate. The Company also performs subsequent transaction testing. The Company performs annual due diligence of third-party pricing services. The Company’s due diligence procedures include assessing the vendor’s valuation qualifications, control environment, analysis of asset-class specific valuation methodologies, and understanding of sources of market observable assumptions and unobservable assumptions, if any, employed in the valuation methodology. The Company also considers the results of its exception reporting controls and any resulting price challenges that arise.

Separate Account Assets

The fair value of assets held by separate accounts is determined by the NAV of the funds in which those separate accounts are invested. The NAV is used as a practical expedient for fair value and represents the exit price for the separate account. Separate account assets are excluded from classification in the fair value hierarchy.

Investments and Cash Equivalents Segregated for Regulatory Purposes

Investments and cash equivalents segregated for regulatory purposes includes U.S. Treasuries that are classified as Level 1.

Receivables

The Company reinsured its fixed deferred indexed annuity products which have an indexed account that is accounted for as an embedded derivative. The Company uses discounted cash flow models to determine the fair value of these ceded embedded derivatives. The fair value of fixed deferred indexed annuity ceded embedded derivatives includes significant observable interest rates, volatilities and equity index levels and significant unobservable surrender rates. Given the significance of the unobservable surrender rates, these embedded derivatives are classified as Level 3.

Other Assets

Derivatives that are measured using quoted prices in active markets, such as derivatives that are exchange-traded, are classified as Level 1 measurements. The variation margin on futures contracts is also classified as Level 1. The fair value of derivatives that are traded in less active over-the-counter (“OTC”) markets is generally measured using pricing models with market observable inputs such as interest rates and equity index levels. These measurements are classified as Level 2 within the fair value hierarchy and include swaps, foreign currency forwards and the majority of options. The counterparties’ nonperformance risk associated with uncollateralized derivative assets was immaterial as of both June 30, 2023 and December 31, 2022. See Note 14 and Note 15 for further information on the credit risk of derivative instruments and related collateral.

Liabilities

Policyholder Account Balances, Future Policy Benefits and Claims

There is no active market for the transfer of the Company’s embedded derivatives attributable to the provisions of fixed deferred indexed annuity, structured variable annuity and IUL products.

The Company uses a discounted cash flow model to determine the fair value of the embedded derivatives associated with the provisions of its equity index annuity product. The projected cash flows generated by this model are based on significant observable inputs related to interest rates, volatilities and equity index levels and, therefore, are classified as Level 2.

The Company uses discounted cash flow models to determine the fair value of the embedded derivatives associated with the provisions of its fixed deferred indexed annuity, structured variable annuity and IUL products. The structured variable annuity product is a limited flexible purchase payment annuity that offers 45 different indexed account options providing equity market exposure and a fixed account. Each indexed account includes a protection option (a buffer or a floor). If the index has a negative return, contractholder losses will be reduced by a buffer or limited to a floor. The portion allocated to an indexed account is accounted for as an embedded derivative. The fair value of fixed deferred indexed annuity, structured variable annuity and IUL embedded derivatives includes significant observable interest rates, volatilities and equity index levels and significant unobservable surrender rates and the estimate of the Company’s nonperformance risk. Given the significance of the unobservable surrender rates and the nonperformance risk assumption, the fixed deferred indexed annuity, structured variable annuity and IUL embedded derivatives are classified as Level 3.

The embedded derivatives attributable to these provisions are recorded in Policyholder account balances, future policy benefits and claims.

Customer Deposits

The Company uses Black-Scholes models to determine the fair value of the embedded derivative liability associated with the provisions of its stock market certificates (“SMC”). The inputs to these calculations are primarily market observable and include interest rates, volatilities and equity index levels. As a result, these measurements are classified as Level 2.

Other Liabilities

traded in less active OTC markets is generally measured using pricing models with market observable inputs such as interest rates and equity index levels. These measurements are classified as Level 2 within the fair value hierarchy and include swaps, foreign currency forwards and the majority of options. The Company’s nonperformance risk associated with uncollateralized derivative liabilities was immaterial as of both June 30, 2023 and December 31, 2022. See Note 14 and Note 15 for further information on the credit risk of derivative instruments and related collateral.

Securities sold but not yet purchased represent obligations of the Company to deliver specified securities that it does not yet own, creating a liability to purchase the security in the market at prevailing prices. When available, the fair value of securities is based on quoted prices in active markets. If quoted prices are not available, fair values are obtained from nationally-recognized pricing services, or other model-based valuation techniques such as the present value of cash flows. Level 1 securities sold but not yet purchased primarily include trading securities and U.S. Treasuries traded in active markets. Level 2 securities sold but not yet purchased primarily include corporate bonds.

Contingent consideration liabilities consist of earn-outs and/or deferred payments related to the Company’s acquisitions. Contingent consideration liabilities are recorded at fair value utilizing a discounted cash flow model using an unobservable input (discount rate). Given the use of a significant unobservable input, the fair value of contingent consideration liabilities is classified as Level 3 within the fair value hierarchy.

Fair Value on a Nonrecurring Basis

The Company assesses its investment in affordable housing partnerships for impairment. The investments that are determined to be impaired are written down to their fair value. The Company uses a discounted cash flow model to measure the fair value of these investments. Inputs to the discounted cash flow model are estimates of future net operating losses and tax credits available to the Company and discount rates based on market condition and the financial strength of the syndicator (general partner). The balance of affordable housing partnerships measured at fair value on a nonrecurring basis was $49 million and $58 million as of June 30, 2023 and December 31, 2022, respectively, and is classified as Level 3 in the fair value hierarchy.

Assets and Liabilities Not Reported at Fair Value

The following tables provide the carrying value and the estimated fair value of financial instruments that are not reported at fair value:


	June 30, 2023
	Carrying Value		Fair Value
			Level 1		Level 2		Level 3		Total
	(in millions)
Financial Assets
Mortgage loans, net	$	2,033	$	—	$	183	$	1,667	$	1,850
Policy loans	874		—		874		—		874
Receivables	9,693		76		1,629		6,713		8,418
Restricted and segregated cash	950		950		—		—		950
Other investments and assets	348		—		299		48		347

Financial Liabilities
Policyholder account balances, future policy benefits and claims	$	15,347	$	—	$	—	$	13,109	$	13,109
Investment certificate reserves	12,060		—		—		11,986		11,986
Banking and brokerage deposits	23,538		23,538		—		—		23,538
Separate account liabilities — investment contracts	3,313		—		3,313		—		3,313
Debt and other liabilities	3,860		105		3,651		6		3,762


	December 31, 2022
	Carrying Value		Fair Value
			Level 1		Level 2		Level 3		Total
	(in millions)
Financial Assets
Mortgage loans, net	$	1,987	$	—	$	105	$	1,695	$	1,800
Policy loans	847		—		847		—		847
Receivables	10,287		199		1,742		6,996		8,937
Restricted and segregated cash	1,583		1,583		—		—		1,583
Other investments and assets	375		—		323		51		374

Financial Liabilities
Policyholder account balances, future policy benefits and claims	$	14,450	$	—	$	—	$	12,470	$	12,470
Investment certificate reserves	9,310		—		—		9,253		9,253
Banking and brokerage deposits	21,474		21,474		—		—		21,474
Separate account liabilities — investment contracts	3,383		—		3,383		—		3,383
Debt and other liabilities	3,242		234		2,909		7		3,150

Receivables include deposit receivables, brokerage margin loans, securities borrowed, pledged asset lines of credit and loans to financial advisors. Restricted and segregated cash includes cash segregated under federal and other regulations held in special reserve bank accounts for the exclusive benefit of the Company’s brokerage customers. Other investments and assets primarily include syndicated loans, credit card receivables, certificate of deposits with original or remaining maturities at the time of purchase of more than 90 days, the Company’s membership in the FHLB and investments related to the Community Reinvestment Act. See Note 7 for additional information on mortgage loans, policy loans, syndicated loans, credit card receivables and deposit receivables.

Policyholder account balances, future policy benefits and claims include fixed annuities in deferral status, non-life contingent fixed annuities in payout status, indexed and structured variable annuity host contracts, and the fixed portion of a small number of variable annuity contracts classified as investment contracts. See Note 9 for additional information on these liabilities. Investment certificate reserves represent customer deposits for fixed rate certificates and stock market certificates. Banking and brokerage deposits are amounts payable to customers related to free credit balances, funds deposited by customers and funds accruing to customers as a result of trades or contracts. Separate account liabilities are primarily investment contracts in pooled pension funds offered by Threadneedle. Debt and other liabilities include the Company’s long-term debt, short-term borrowings, securities loaned and future funding commitments to affordable housing partnerships and other real estate partnerships. See Note 12 for further information on the Company’s long-term debt and short-term borrowings.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details